A former president of the hall maintains that the charity does not comply with charity accounting standards

Royal Albert Hall

The next meeting of the Charity Commission board later this month is expected to discuss a complaint that the accounts of the Royal Albert Hall do not comply with charity accounting standards.

The complaint, based on the opinions of an experienced charity accountant and a specialist barrister, has been made to the commission by Richard Lyttelton, a former president of the hall.

It argues that the accounts fail to mention so-called "related-party transactions", which the Statement of Recommended Practice for charity accounts says should be included.

To comply with the Sorp, Lyttelton says the accounts should declare the amounts earned by members of the council – the hall’s governing body – from the sale of tickets for the seats they own or control.

The majority of the council is elected from its own number by about 350 people, known as seat-holders, who own nearly a quarter of the hall’s 5,272 seats and can make money by selling tickets for them, either through the box office or at higher prices on the internet.

Tickets for the last night of the Proms on 10 September are currently being sold on internet ticket agencies for up to £880 for a seat with a face value of less than £100.

The background to Lyttelton’s complaint is a long-running dispute between the commission and the hall over the control of the governing body by people who in some cases own or control many seats and stand to make substantial sums from sales.

The commission told the hall in December 2014 that this conflict of interest had become so acute that the constitution should be changed "to minimise the real risk that council members will prefer their own interests to those of the charity".

The hall did not comply with the commission’s deadline of September 2015 to make the council an independent body on which seat-holders would be a minority. Negotiations are now taking place to resolve what the chair of commission, William Shawcross, has called an "impasse".

When the hall was founded in 1866, some of the money was raised by selling the best 1,200 seats, which have since been inherited or traded.

The hall argues that seat-holders’ income from selling tickets derives from their private property, is not a benefit that the charity confers on them and therefore is not a related-party transaction.

But Lyttelton’s complaint points out that the hall charges seat-holders an annual fee for the upkeep of their seats, prints and sends them their tickets and runs a scheme under which they can return unwanted tickets to the box office, which sells the tickets and sends them the proceeds.

Seat-holders are also reimbursed, he adds, when they give up their seat rights for so-called exclusive lettings, usually for lucrative big-name events

Lyttelton argues that these various services and payments enable seat-holders to generate a personal income, which should therefore be disclosed under rule 33.9 of the Sorp about related-party transactions. Related parties are defined as persons or entities that are closely connected to the reporting charity or its trustees.

Seat-holders are sent accounts for the money they receive from the ticket return scheme and for commission on exclusive lettings, so these sums could be easily declared, he says. He accepts that the more lucrative sale of tickets on the internet, practised by some seat-holders, could not easily be quantified.

A spokesman for the Charity Commission confirmed that the accounting issues raised by Lyttelton were being considered by the committee overseeing the case, which reports regularly to the board. He refused to say which committee this was – it is likely to be the public interest and high-risk cases committee – or when the board meeting will be.

A spokesman for the hall said Lyttelton’s complaint was "a rehash" of points he raised at the annual meeting in May, when the report and accounts were approved by all members present except him. (Members of the Corporation of the Hall of Arts and Sciences – the formal name of the hall – are the 350 seat-holders.)

The spokesman said:"We said to him that we were of the view that they complied fully with FRS102 and so were our auditors, who had already confirmed their advice on that point with the Charity Commission. That view has not changed." FRS102 is the Financial Reporting Standard on which the Sorp is based.

The report and accounts for 2015 are published on the hall’s website but are not yet on the commission’s website, which shows that in previous years the report and accounts were received in May or June.

This year, for the first time, the report mentions that the 19 council members and their relatives own a total of 145 seats, but it does not mention that they are able to earn considerable income from these holdings.

Recent prices indicate that 145 seats could currently be sold on the open market for more than £14m and that tickets for them, if sold through the box office, could generate income of more than £700,000.

Lyttelton, who owns four seats from which he earned approximately £20,000 in 2015 through box-office returns, said the hall’s own figures show that between 2014 and 2015 the hall’s income rose by 4.6 per cent, the contribution by members for the upkeep of their seats by 1 per cent and members’ income, excluding internet sales, by 30 per cent.

"The importance of all this information is that not only the public but donors, a number of whom are themselves members, rely on the annual report and accounts to be both transparent and compliant," he said.

"As I pointed out at the annual meeting, these issues would probably not have arisen if, in line with best practice, the hall’s accounts were subject to the scrutiny of an audit committee with independent members. Regrettably the accounts were voted through anyway."